Case 1:17-cv-07857-JMF-GWG Document 243 Filed 11/08/18 Page 1 of 3

300 North LaSalle

Chicago, IL 60654
Richard C. Godfrey, P.C. United States
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richard.godfrey@kirkland.com
www.kirkland.com

November 8, 2018

VIA ECF

The Honorable Jesse M. Furman

United States District Court
Southern District of New York
40 Centre Street, Room 2202
New York, New York 10007

Re: U.S. Bank National Association v. Windstream Services, LLC,

17-CV-07857 (S.D.N.Y.)

Dear Judge Furman:

We write on behalf of Windstream Services, LLC (“Services”) in response to Aurelius

Capital Master, Ltd.’s (“Aurelius”) November 6, 2018 letter (the “November 6 Letter”)
(Dkt. No. 242), in which Aurelius purports to “call the Court’s attention to a recent and instructive
decision.” That November 6 Letter raises nothing new, and simply regurgitates arguments
Aurelius previously made. In this regard:

First, the precise -- and narrow -- holding in Blackrock Balanced Capital Portfolio v. U.S.
Bank N.A., 2018 WL 5046640 (1st Dep’t. Oct. 18, 2018) (“Blackrock II”) has no relevance here.
In Blackrock II, the First Department explained that the “conflict” excusing compliance with the
no-action clause was that “it would be futile to demand that the trustee commence an action against
itself.” Blackrock II, 2018 WL 5046640 at *2. But here, there is no such conflict as Aurelius did
not sue the Trustee; nor did it demand the Trustee sue itself.1 Instead, Aurelius brought
counterclaims against Services relating to the Exchange and the issuance of New August 2023
Notes, which counterclaims are (i) contrary to the stated wishes and interests of the majority of
August 2023 noteholders, and (ii) barred by the express terms of the No-Action Clause. Under
that provision of the Indenture, individual noteholders such as Aurelius are precluded from seeking

1
For the same reason, Aurelius’s reliance on Blackrock Core Bond Portfolio v. U.S. Bank Nat’l Ass’n, 165 F. Supp.
3d 80 (S.D.N.Y. 2016) -- a two year old case -- is also misplaced. There too, the court determined the no-action
clause did not apply because the trustee was sued for failing to perform its duties, and therefore did not need to
be given notice of the possibility of a suit. Id. at 98-99.

Beijing Boston Dallas Hong Kong Houston London Los Angeles Munich New York Palo Alto San Francisco Shanghai Washington, D.C.
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Hon. Jesse M. Furman

November 8, 2018
Page 2

remedies where (as here) such remedies would (i) be inconsistent with a direction to the Trustee
given by the majority of noteholders (Section 6.06(a)(v)), or (ii) affect, disturb or prejudice the
rights of another noteholder (Section 6.06(b)). The New August 2023 Notes have been issued and
cannot now be rescinded, and the majority of holders of the August 2023 Notes have consented to
waive the very claims that Aurelius pleads. That U.S. Bank, the Trustee, executed the Third
Supplemental Indenture, which implemented the majority holders’ desire to waive Aurelius’s
claims, does not excuse Aurelius from making a demand on the Trustee under the No-Action
Clause, and it certainly does not permit Aurelius to circumvent the other mandatory requirements
of Section 6.06, including Sections 6.06(a)(v) and 6.06(b).2 See Services’ Proposed Findings of
Fact and Conclusions of Law, Dkt. No. 165 ¶¶ 226-52.

Second, the “conflict” argument Aurelius is making could be made in every instance where
a majority of the noteholders vote one way, and a single minority noteholder disagrees. That, of
course, would result in an improper rewriting of the Indenture. It is settled, however, that courts
do not rewrite plain and unambiguous contracts at the demands or one or more parties.

Third, Aurelius’s suggestion that because U.S. Bank had executed the Third Supplement
Indenture, the requirements for Aurelius to comply with all provisions of the No-Action Clause
should be excused is simply baseless. In Blackrock II, the First Department held that the plaintiffs
there did not have to comply with any of the demand requirements of the no-action clause because
they were suing the trustee directly for its own purported misfeasance. Blackrock II, 2018 WL
5046640 at *2. That holding is understandable in the context of that case -- not this one. There is
no basis for excusing Aurelius from the mandatory requirements of the No-Action Clause.3

2
Under Aurelius’s logic, a noteholder who is not content with any action consented to by a majority of fellow
noteholders and executed upon by the trustee would be permitted to bring a claim without complying with any
provision of a no-action clause, simply because the trustee signed off on the transaction. Such an interpretation
would render no-action clauses meaningless and would run completely counter to the clause’s clear and practical
intent of equal treatment of bondholders and eliminating spurious claims by individual rogue noteholders. See In
re Electroglas, Inc., No. 09-12416 (PJW), 2009 WL 8503455, at *1 (Bankr. D. Del. Sep. 23, 2009 (recognizing
“the overarching prescription that all actions taken as to the Notes be taken for the equal benefit of all
Noteholders”); In re Cherokee Cty., Health Care Facility Revenue Bonds, 262 Kan. 941, 953-54, 946 P.2d 83, 92
(1997) (“[A]ll bonds are issues in parity and coequal with all other bondholders. Moreover, the intent expressed
generally throughout the indentures is that all bondholders are to be treated alike.”).
3
Services has repeatedly explained that Aurelius’s mirror-image argument -- that all of the arguments it advances
in support of its counterclaims are available as defenses to Services’ claims against Aurelius -- is incorrect as it
misconstrues Services’ counterclaim against the Trustee and the purpose of Section 6.06. Compare Aurelius’s
Proposed Findings of Fact and Conclusions of Law, Dkt. No. 167 ¶ 83, with Joint Pre-Trial Statement, Dkt. No.
206 ¶ 10; see also July 31, 2018 Tr. at 740:10-749:4.
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Hon. Jesse M. Furman

November 8, 2018
Page 3

Fourth, the record evidence here is that U.S. Bank in its lawsuit against Services is acting
at the direction of Aurelius. Indeed, U.S. Bank’s lawyers at the start were originally Aurelius’s
own lawyers. (July 24, 2018 Tr. at 409:21-410:5.) Accordingly, the notion that there is some
disabling “conflict” entitling Aurelius to breach and violate the No-Action Clause to the detriment
of all other noteholders is, we submit, more than a curious one.

Finally, Blackrock II also does not assist Aurelius with its threshold No-Action problem:
Aurelius has not even noticed a default with respect to its counterclaims relating to the Exchange
and the issuance of the New August 2023 Notes and, therefore, an Event of Default has not
occurred. See Services’ Proposed Findings of Fact and Conclusions of Law, Dkt. No. 165 ¶¶ 307-
311. As but one consequence of Aurelius’s failure to issue a notice a default (that could mature
into an Event of Default) before it asserted its counterclaims, Services was denied the opportunity
to attempt to cure the purported default, as prescribed by the Indenture.4

At the conclusion of the trial, the Court directed that there be no further briefing. (July 31,
2018 Tr. at 764:16-18 (“If in the course of writing I think there is any need for supplemental
briefing, I will let you know.”).) A letter of supplemental authority making the same arguments
raised prior to and at trial, and even including a copy of a two year old case, warrants no further
consideration; nor does it justify Aurelius’s violation of the Indenture’s No-Action Clause.

Respectfully submitted,

/s/ Richard C. Godfrey, P.C.

Richard C. Godfrey, P.C.

cc: All Counsel of Record (via ECF)

4
Aurelius’s primary contention in its counterclaims is that the issuance of the New August 2023 Notes violated
the Indenture’s covenants by increasing Services’ debt by $42 million. However, while Services contends in this
lawsuit among other things that the issuance of the New August 2023 Notes constituted Permitted Refinancing
Indebtedness and did not violate any covenant, Services was never even afforded -- as required by the Indenture
-- the opportunity to cure any purported default by reducing its debt or otherwise.